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Arguments in today's closely followed v. Erica P. John Fund didn't provide a convincing vision of how the U.S. Supreme Court will decide the central question of whether to toss out a theory that has fueled tens of billions of dollars worth of securities class actions since the court adopted it in 1988.

In oral arguments that featured superlawyer David Boies arguing in favor of the status quo, the justices spent little time asking about the fraud-on-the-market theory, which allows plaintiff lawyers to avoid showing stockholders relied on a company's false statements in order to assemble a case. Instead, the court ruled in Basic vs. Levinson that investors can be presumed to have relied on the price of the stock itself and companies can be liable for any losses that occur after they release information suggesting that price had been inflated by false statements.

Halliburton argues plaintiffs should be required to prove, before a class can be assembled, that company statements inflated the stock price. And Justices Anthony Kennedy and Sonia Sotomayor kept asking lawyers for both sides why such an inquiry can't be made with so-called event studies as part of the class certification process.

But one key problem for Halliburton is that in addition to Basic, the court has since ruled twice that courts can't order broad inquiries into materiality and loss causation, two elements of securities cases, at the certification stage. Virtually all securities class actions settle after certification, since companies can't, as a fiduciary matter, risk their net worth on a bad outcome.

Chief Justice John Roberts seemed little interested in overruling Basic, after making a perfunctory inquiry of attorney Aaron Streett of which economic papers to read on the topic of efficient markets, key to fraud on the market. Kennedy attacked the doctrine more aggressively, at one point saying "it's hard to see how the Basic theory can be sustained" unless a company's stock reacts almost instantaneously to fraudulent news. Otherwise investors who bought after a stock-inflating announcement might have gotten a price that didn't reflect any inflation at all.

And several justices explored a middle path that would require plaintiff lawyers to put up some proof that investors had paid an inflated price before judges could place them all in a single class. Without class action treatment, lawyers argue, no one has a big enough claim to pursue a case.

Observers shouldn't read too much into the fact the justices didn't spend a lot of time asking about Basic, said Andrew Pincus, an appellate lawyer with Mayer Brown.

"The court asked questions about things that were not clear from the briefs," Pincus said. "The questions didn't focus (fraud on the market) because it was pretty clear."

By focusing on the nuts and bolts of when and how to require plaintiffs to show a company inflated its stock price, he said, "tells me, that's the issue where the consequences and how it will work come into play."

While there are manifest problems with fraud-on-the-market, including the fact that many investors buy stocks because they believe the price is wrong, Pincus said prior precedents have left the Justices with the tough choice of leaving the law as it is or overturning it wholesale.

"It may be that at the end of day, people who might be inclined to say `let's have this proven at the class certification stage' are kind of in a box," he said.

Plaintiff lawyers may not be any happier with how the arguments went. Christopher McDonald, a partner with Labaton Sucharow, said in an e-mailed analysis:

A critical point that seemed to get lost in the argument is that for most false statements, the ‘price impact’ only occurs with the corrective disclosure. To the extent ‘price impact’ is considered to be synonymous with ‘price movement,’ the only rule that would make sense is one that recognizes that the movement can occur when the truth is revealed.

The justices didn't seem to agree entirely with this analysis, however. Basic doesn't say the only way to measure losses due to fraud is how much the stock fell after an adverse announcement. It assumes the stock was inflated by false information and investors suffered losses because they took the price to be fair when they bought. Kennedy asked why plaintiff lawyers can't be required to use event studies to show how much a stock was inflated by fraudulent statements. And Breyer seemed surprised to learn that Halliburton was prevented from using such information to defeat class certification.